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Bank of Bengal Vs. W.A. Lucas - Court Judgment

LegalCrystal Citation
Decided On
Reported in(1924)ILR51Cal185
AppellantBank of Bengal
RespondentW.A. Lucas
Cases ReferredRaja Indrajit Pratap v. Amer Singh
stamp duty - document--security by debtor to surety, right of creditor to benefit of. - mookerjee, j.1. this is an appeal by the plaintiff to enforce a charge upon immovable property for the realisation of a sum of rs. 78,504-10-2 with interest pendente lite and costs. the transactions which have led up to this litigation are evidenced by four deeds, whose substance must be stated concisely for the elucidation of the points in controversy.2. lucas, the first defendant, is a dealer in jute. on the 6th april 1908, he executed an equitable mortgage (which for the sake of brevity may be called a) by deposit of title deeds in favour of his broker thaddeus who financed him in his business. on the 8th july 1910 lucas executed in favour of vertannes and bertram, an english mortgage (which for the sake of brevity may be called b) of the properties covered by a. according to the.....

Mookerjee, J.

1. This is an appeal by the plaintiff to enforce a charge upon immovable property for the realisation of a sum of Rs. 78,504-10-2 with interest pendente lite and costs. The transactions which have led up to this litigation are evidenced by four deeds, whose substance must be stated concisely for the elucidation of the points in controversy.

2. Lucas, the first defendant, is a dealer in jute. On the 6th April 1908, he executed an equitable mortgage (which for the sake of brevity may be called A) by deposit of title deeds in favour of his broker Thaddeus who financed him in his business. On the 8th July 1910 Lucas executed in favour of Vertannes and Bertram, an English mortgage (which for the sake of brevity may be called B) of the properties covered by A. According to the recitals in this document, Lucas was indebted to Thaddeus under A to the extent of Rs. 63,560 approximately. The arrangement was that the mortgagees should be the sole brokers of the mortgagor during the continuance of the security, and that they should secure an advance of Rs. 50,000 by means of drafts to be drawn by one of them in favour of the other and to be discounted by the Bank of Bengal. On the 26th June 1911, a supplemental indenture of mortgage (which for the sake of brevity may be called 0), was executed. According to recitals in this deed, there was due to Thaddeus, under A, a sum of Rs. 65,000 approximately, and to Vertannes and Bertram, under B, a sum of Rs. 10,755-15. The arrangement was that Thaddeus should be paid off, the requisite money to be provided by the Bank of Bengal by way of cash credit to Lucas. A promissory note was given by Lucas to Vertannes and Bertram and was endorsed by them to the Bank of Bengal. The Bank placed Rs. 65,000 in the hands of Lucas, and with this sum Thaddeus was fully paid off. Thaddeus at the same time executed a deed of release in favour of Lucas. Vertannes and Bertram simultaneously executed a deed of guarantee in favour of the Bank for the sum advanced to Lucas, and Lucas executed a deed of further charge in favour of Vertannes and Bertram in order to enable them to execute the deed of guarantee. Bertram died on the 27th December 1912, and letters of administration in respect of his estate were taken out by the Administrator-General on the 17th January 1913. On the 4th February 1914, a fresh deed was executed which for the sake of brevity may be called D. This purports to be supplemental to B and C, and the parties to the document were Lucas, Vertannes, the Administrator-General and the Bank of Bengal. The document was neither stamped nor attested as a mortgage but was treated as a transfer of mortgage. The recitals show that at the time there was due to the Bank a sum of Rs. 74,017-1-4, namely, Rs. 13,084-13-7 on account of drafts discounted in conformity with the arrangements embodied in B, and Rs. 60,932 on the cash credit opened on the basis of C. The Bank, it is recited, had called upon Lucas, Vertannes and the representatives of Bertram to furnish further security in respect of this sum. The arrangement was that Vertannes and the Administrator-General should transfer to the Bank the full benefit of the securities created by B and C and that in consideration of such transfer the Bank should release Vertannes and the representatives of Bertram from all liability under the drafts discounted by the Bank, as also under the promissory note and the guarantee. Lucas has not satisfied the debt due to the Bank: thereupon the present suit was instituted by the Bank on the 20th December 1917. Lucas was made the first defendant. Puisne mortgagees from Lucas, the proprietors of a firm named Gourchandra Das were joined as defendants Nos. 2 to 16. Vertannes and the Administrator-General were placed on the record as pro forma defendants Nos. 17 and 18. In the plaint as originally framed, the claim was founded on D, the deed of the 4th February 1914. The plaint was however, subsequently amended on the 6th January 1919, so as to enable the Bank to take advantage of B and C, the mortgage, dated the 8th July 1910 and the 29th June 1911. The defendants contested the claim on every conceivable ground as will appear from the eighteen issues raised:

I. Has the plaintiff Bank of Bengal cause of action?

II. Is the suit maintainable in its present form?

III. is the suit for sale based on the document of the 4th February 1914, maintainable and enforceable against the defendant No. 17? Is the deed as pleaded by the defendant No. 1 an English mortgage and is it sufficiently stamped and attested? If so, has this Court jurisdiction to entertain the suit on such a mortgage?

IV. Have the rights, titles and interests of the defendants 17 and 18 been legally transferred to the plaintiff Bank? If not, can plaintiff proceed with the suit?

V. Was there any contract between the parties relating to the law charges? Are they correct and are they recoverable in the present suit?

VI. Was there any contract between the parties as to insurance charges? If not, is the same maintainable and recoverable in the present suit?

VII. Was the plaintiff's agent authorised to make any payment for insurance charges and can any such payment be a charge on the mortgaged properties?

VIII. Was there any contract for payment of compound interest and is it recoverable? Is the account annexed to the plaint correct?

IX. Has the sum of Rs. 7,543-15 been paid to the defendants Nos. 17 and 18 by the defendant No. 1? If so, is anything due by the defendant to the plaintiff under the indenture of 1910?

X. Is the account contained in the document of 1914 correct and due by the defendant? Can it be a charge on the mortgaged properties

XI. Is the indenture dated 4th February 1914, properly drafted, engrossed, signed, and stamped with the knowledge of the defendant? Were the properties described in Schedules A and B mortgaged to the plaintiff Bank?

XII. To what relief, if any, is the plaintiff entitled?

XIII. Did the plaintiff Bank advance Rs. 65,000 on the security of the immovable properties to the defendant No. 1? If not, can the Bank enforce the claim under law

XIV. Was the bond of 1911 legally attested and presented for registration and did any consideration pass under the same? Can the plaintiff enforce any lien under the same

XV. Has the plaintiff acquired a right under the deed of 1914 with respect to the deed of 1911

XVI. Can the plaintiff enforce the lien in respect of the bond of 1908 in favour of Thaddeus? Is that lien still alive

XVII. Is the claim of the plaintiff on the basis of pro-note barred by limitation

XVIII. Should the suit fail for non-substitution of the legal representatives of the defendant No. 12 in time

3. The Subordinate Judge has dismissed the suit. On the present appeal the decision of the Subordinate Judge has been assailed as erroneous both on the facts and in law. I shall first consider the three substantial questions of fact which have emerged from the arguments addressed to us, namely, first, was the Bank of Bengal the real mortgagee under the deed of the 29th June 1911; secondly, was the mortgage of the 29th June, 1911, duly executed and attested; and thirdly, was the indenture of the 4th February, 1914, executed by Lucas under circumstances which entitle him to treat it as inoperative in so far as he is concerned. In my judgment, the conclusions of the Subordinate Judge upon each of these points ares erroneous and cannot be supported.

4. As regards the first point, it was argued in the Court below that Vertannes and Bertram were set up by the Bank as ostensible mortgagees, because the authorities were anxious to circumvent the provisions of Sections 36 and 37 of the Presidency Banks Act. This theory found favour with the Subordinate Judge, though no solid foundation was laid for such a case in the evidence. The Subordinate Judge based his conclusion on this part of the case on mere suspicion, contrary to the elementary rule that the burden lies heavily upon those who claim against the tenor of a deed to establish by evidence that the real transaction, was different from the apparent. The Senior Government Pleader very properly declined to support the view taken by the Subordinate Judge on this matter.

5. As regards the second point, the Subordinate Judge came to the conclusion that the mortgage of the 29th June, 1911, had not been duly attested, and he relied principally upon the evidence of Lucas as to what had happened at the time of execution. After a careful study of the evidence of Lucas, I have not been able to adopt the conclusion that he may be unreservedly treated as a witness of truth; he is so vitally interested in the result of this litigation that it would not be safe to act upon his assertions without independent corroboration. With regard to the question of attestation, his story, taken by itself, is most improbable, and no reason was even suggested why a witness of the position of Stapledon, a member of a well-known firm of solicitors, should have attested a signature which had not been made in his presence. Stapledon was first examined on commission on the 12th August, 1918, and the point was then not cleared up. The reason is obvious; at that stage, the claim was rested solely on the document of the 4th February, 1914, and no one realised the vital importance of the question of attestation of the mortgage of the 29th June, 1911, till the plaint had been amended on the 6th January, 1919. An application was made to the Subordinate Judge at the close of the trial for leave to examine Stapledon. He refused the application, as, in his judgment, his view upon other points in the case rendered the question of attestation immaterial; but he did not record the opinion that he would have been inclined to afford an opportunity to the Bank to examine Stapledon if the decision of the case had hinged on the point. After we had heard arguments in this appeal for a considerable time, we felt convinced that this point should be cleared up in the interests of justice. The original document purports, on the face of it, to have been attested by two witnesses, Stapledon and Evenett. Their signatures are so placed on the document that presumably they signed after the document had been executed in their presence: Binaybhusan Ray v. Dhirendranath De (1923) 33 C.L.J. 114. The case was covered obviously by both Clauses (a) and (6) of Order XLI, Rule 27(1) of the Code of Civil Procedure. Under Clause (a), the Appellate Court may allow additional evidence if the trial Court has refused to admit evidence which should have been admitted. Under Clause (b), the Appellate Court may allow additional evidence, if it requires such evidence to enable it to pronounce judgment or for any other substantial cause. We decided accordingly to examine both Stapledon and Evenett; the course adopted is supported by the decisions of the Judicial Committee in Kessowji Issur v. G.I.P. Ry. Co. (1907) L.R. 34 I.A. 115; I.L.R 31 Bom. 381 and Raja Indrajit Pratap v. Amar Singh (1923) L.R. 50 I.L. 183. Stapledon and Evenett were thereupon examined, and their testimony left no doubt that the mortgage deed of the 29th June, 1911, had been duly attested by them after they had witnessed its execution. The respondents were allowed full opportunity to bring forward additional evidence, if they so wished. They intimated that they had no desire to rebut this evidence on the record as it now stands. I feel convinced that the mortgage of the 29th June, 1911, was duly executed and attested.

6. As regards the third point, the Subordinate Judge has held that Lucas is not bound by the deed of the 4th February, 1914. His conclusion is based chiefly, if no entirely, upon the assertions of Lucas. The story of execution of the document by Lucas is by no means convincing and is not sufficient to support a case either of fraud or of undue influence. Lucas was a man of business and was in no sense a novice. If it be his case that he affixed his signature to the deed in the belief that it was something other than what it purports to be, his evidence does not bear out such a theory. The attempt, in such circumstances, to take advantage of the principle enunciated in the class of cases of which Foster v. Mackinnon (1869) L.R. 4 C.P. 704, and Carlisle Banking Co. v. Bragg [1911] 1 K.B. 489 may be taken as the types is futile Nor is foundation laid in the evidence for a case of under influence under the provisions of the Indian Contract Act; there is no question of confidence reposed and betrayed, much less of domination of his will to obtain an unfair advantage over him, within the meaning of Section 16 which was expounded by Lord Shaw in delivering the judgment of the Judicial Committee in Poosathurai v. Kannappa (1919) L.R. 47 1. A. 1. The outstanding fact cannot moreover be ignored that since the 4th February, 1914, Lucas has made no attempt to obtain cancellation of the deed of that date, and delay and quiescence mast throw serious doubts upon the genuineness of his defence: Allcard v. Skinner (1887) 36 Ch. D. 145, Wright v. Vanderplank (1856) 8 De G.M. & G. 133; 114 R.R. 60. In my opinion, the endeavour of Lucas to wriggle out of the transaction of the 4th February, 1914, is bound to end in failure.

7. I shall next consider the two substantial questions of law involved in the appeal, namely, first, is the Bank entitled to relief on the basis of either the indenture of the 4th February, 1914, or the mortgages of the 8th July, 1910 and the 29th June, 1911; and secondly, whether Lucas is, in this suit, entitled to reopen the accounts as between himself and Vertannes and the representatives of Bertram.

8. As regards the first question, there has been some discussion at the Bar as to the exact nature of the indenture of the 4th February, 1914, which was neither stamped nor attested as a mortgage, but was taken to be a transfer of a mortgage. It is well settled that in determining whether an instrument is liable to duty as a transfer only or to the full duty of a mortgage, the Court will look at the substance of the transaction and not merely at the form of the instrument; City of London Brewery v. Inland Revenue Commissioners [1899] 1 Q.B. 121. Thus where a deed was executed by a mortgagor, professing to be a transfer of a mortgage for 150 and a security for a further advance of 70, on which sum the stamp was calculated, upon objection taken that the deed in fact amounted to an original mortgage for 220, as the original mortgagee did not execute it, it was ruled that it could not fairly be said so to operate and that the stamp was sufficient: Doe v. Tom (1843) 4 Q.B. 615; 62 R.R. 145. On the other hand, in Barham v. Earl of Thanet (1834) 3 My. & K. 607. where the mortgagee assigned a part of the mortgage debt and joined with the heir of the mortgagor in conveying part of the mortgage lands to a new mortgagee, with a new proviso and at a new rate of interest and with a bond and a covenant, the transaction was regarded as a new mortgage. But it may be taken as a general rule that the introduction of a new proviso for redemption in the assignment of a mortgage is not by itself sufficient to constitute a new mortgage. In the absence, however, of a statutory provision like that embodied in Section 27 of the Conveyancing Act, 1881, which prescribes forms of statutory transfer of mortgage, there is no reason why a document should not be of a mixed character, namely, a transfer of a mortgage as also a new mortgage. In this view, the Bank would be entitled to take advantage of the deed of the 4th February, 1914, which as a deed of transfer of mortgage, does not require attestation; and if any question of stamp duty could arise on such a view, the defect could be remedied by payment of penalty. In the events which have happened, the Bank is, in my opinion, entitled to the securities held by Vertannes and Bertram. If the deed of the 4th February, 1914, be deemed inoperative in law, contrary to the true intention of all parties, they must be relegated to the position they would have occupied if that deed had never been executed: Surjiram Marwari v. Barhamdeo Prasad (1905) 1 C.L.J. 337.

9. I do not feel called upon to review here the history of the development of the well-settled rule relating to a creditor's right to his surety's securities. It is sufficient to State that it was held in an early case, Maure v. Harrison (1692) 1 Eq. Ca. Abr. 93, that if the principal gave any security to the surety for his indemnification, the creditor was entitled to the benefit thereof. 'A bond creditor shall, in this Court, have the benefit of all counter-bonds, all collateral security given by the principal to the surety; and if A owes B money and he and C are bound for it, and A gives C mortgage or bond to indemnify him, B shall have the benefit of it to recover his debt.' But this pronouncement has stood by itself and was not accepted by Lord Eldon in Exp. Waring (1815) 19 Ves. 345;13 R.R. 217; 98 R.R. 211. The later decision In re Walker [1892] 1 Ch. 621 shows that there is no authority for the unqualified proposition that the principal creditor is entitled to the benefit of every collateral security given by the principal debtor to the surety, or that, as was said in Moses v. Murgatroid 1 Johnson N.Y. 119, all securities given by a principal to his surety are held in trust. This theory of trust rests on the analogy derivable from the the class of cases where the remedies of a creditor against the principal debtor are transferred to a surety who has paid the debt (Story on Equity Jurisprudence, Section 638). The application, however, of the principle of subrogation, as expounded in Gurdeo v. Chandrika (1907) I.L.R. 36 Calc. 193 is by no means free from difficulty. In the case where the remedies of the creditor are transferred to the surety, who has paid the debt, the payment by the surety extinguishes the creditor's claim, and what he seeks is a substitution to the creditor's remedies against the' principal debtor. Where this does not happen, there can be no question of substitution proper, for the receipt of the surety's securities by a creditor does not relieve the surety from liability in case the securities prove insufficient. The relief by substitution is extended on the assumption that the debt has been or is to be paid in full, so that further detention of the security is against equity. Another objection to substitution may be found in the fact that the security being for the indemnity of the surety, he has no right to it till he has been damnified by payment; the creditor's remedies against the principal debtor, on the other hand ripen as soon as there has been a refusal to pay. By subrogating the surety to the creditor's remedies against his debtor, the burden is finally placed where it belongs, and therein lies the equity of the transaction. No such object is attained in doing the converse of this, where the only result is to place the creditor in a position of advantage which he cannot claim. The burden in the latter case is not always placed where it belongs; if the securities are sufficient in value, the burden will take care of itself; if they are insufficient the loss will fall, in part at least, on the surety. The view adopted by Lord Eldon in Exp. Waring (1815) 19 Ves. 345 must consequently be regarded as well founded on principle, and a creditor can derive no benefit from securities given by the principal to the surety, unless he can show a direct interest in them by contract or under a trust or unless both principal and surety are bankrupt and the rule in the decision just mentioned applies. In this connection reference may be made to the decisions in Exp. Rush forth (1805) 10 Ves. 409; 8 R.R. 10, Wright v. Morley (1805) 11 Ves. 12, 21; 8 R.R. 69, Wilding v. Richards (1845) 1 Collyer 655; 66 R.R. 234, Powles v. Hargreaves (1853) 3 De G.M. & G. 430; 98 R.R. 202, Bechervaise v. Lewis (1872) L.R. 7 C.P. 372, Vaughan v. Halliday (1874) L.R. 9 Ch. App. 561. It is worthy of note that the rule in Exp. Waring (1815) 19 Ves. 345 was not applied in the Scotch case, Royal Bank of Scotland v. Commercial Bank of Scotland (1882) 7 App. Cas. 366. According to the Scotch rule, the surety has no right to the security, except to indemnify himself for payments actually made; nor have the bill holders any direct claim, though both principal and surety are insolvent; but if the surety's estate pays a dividend for which it is reimbursed out of the security, a new general asset is created; thus, incidentally, in the winding up of the surety's estate, all the creditors derive a certain benefit from the indemnity fund; whatever may remain of the latter goes back to the principal's estate I need not pursue the point further; for apart from these considerations, if the rights of the surety have in effect been assigned to the Bank, as in my judgment they have been, the Bank is entitled to enforce the remedies available to the surety.

10. As regards the second point, it is plain that Lucas is not entitled to re-open in the present litigation the accounts as between himself on the one hand, and Vertannes and the representatives of Bertram on the other. The latter were, no doubt, made parties as pro forma defendants, but the question now attempted to be raised was not put in issue as against them. It must further be remembered that Lucas must be taken, as between himself and the Bank, to be bound by the recitals in the deed of the 4th February, 1914.

11. The result follows that this appeal must be allowed and the decree of the Subordinate Judge set aside. The suit will be decreed with costs both here and in the Court below in respect of the sums mentioned in the deed of the 4th February, 1914 (including charges and expenses) which constitute a first charge on the properties covered by the deeds of the 8th July, 1910, and the 29th June, 1911. The case will be remanded to the Subordinate Judge, with the direction that he will take an account of what is due to the Bank and draw up a decree accordingly.

Rankin J.

12. The fundamental question in this case is a question of law and it can be stated and answered first.

13. The defendant Lucas is a jute merchant and in 1908 a Mr. Thaddeus was his broker and financed him in his business upon security of an equitable mortgage by deposit of title deeds in terms on an instrument dated 6th April 1908.

14. On the 8th July 1910 Lucas executed an indenture of mortgage over the same property in favour of a firm Vertannes and Bertram. This recited the mortgage of 1908 and stated that there was due to Thaddeus thereon a sum of Rs. 63,560 or thereabouts. It contained provisions that thenceforward Vertannes and Bertram would finance Lucas in his business to the extent of Rs. 50,000 and that they should during the subsistence of the security be his sole brokers at a commission of 1 per cent. on all his sales of jute.

15. This mortgage was on 26th June 1911 followed by a supplemental indenture of mortgage which contained the acknowledgment by Lucas that Rs. 10,755-15-0 was then due to Vertannes and Bertram on the security of 1910, and that to Thaddeus on his prior security the amount due was Rs. 65,000 or thereabouts. The deed contains an arrangement whereby Thaddeus was to be paid off. Rs. 65,000 was to be advanced by the Bank of Bengal by way of cash credit to Lucas. The advance was to be made on the security of a promissory note drawn by Lucas in favour of Vertannes and Bertram and endorsed by them to the Bank. Vertannes and Bertram were to execute a deed guaranteeing to the Bank payment of the balance for the time being owing to the Bank by Lucas.

16. Accordingly Lucas by this deed of 1911 covenanted with Vertannes and Bertram (1) 'that he would on demand pay them all monies which they might at any time and from time to time be called upon to pay to the Bank in respect of the promissory note with interest from the date of payment by them to the Bank' (2) 'and also shall and will indemnify and keep indemnified the mortgagees from and against all claim and demands in respect of the said promissory note or the monies payable thereunder' and so forth.

17. The deed then charges all the property already mortgaged and certain additional items of property as security for the payment to the mortgagees as well of all monies which the mortgagees may be called upon to pay to the Bank under the said promissory note....and all interest for the same monies as for the monies secured by the principal indenture (of 1910).

18. At the end of 1912 Bertram died and letters of administration with the will annexed were granted to the Administrator-General of Bengal early in 1913.

19. On the 4th February 1914 an indenture purporting to be supplemental to the mortgage deeds of 1910 and 1911 was entered into by all parties--the Bank, Lucas, Vertannes and the Administrator-General. This document was not stamped or attested as a mortgage but as a transfer of mortgage. The question in hand arises upon this instrument.

20. It recites that under the arrangements of 1910 there is now due to the Bank on drafts discounted the sum of Rs. 13,084-13-7; and that there is due to the Bank upon the cash credit opened in 1911, Rs. 60,932-3-9. It recites that the Bank has called upon the other three parties to give further security for the total sum due Rs. 74,017-1-4 and interest accruing.

And whereas it has accordingly been agreed that the said Vertannes and the Administrator-General should transfer the full benefit of the securities created (by the deeds of 1910 and 1911) to the Bank, to the intent that the Bank shall henceforth hold the same as security for the repayment to the Bank on demand of the said sum of Rs. 74,017-1-4 and interest thereon and that in consideration of such transfer the Bank should release the said Vertannes and the Administrator-General and the estate and effects of the said Bertram from all claims and demands whatsoever under the said drafts so discounted by the Bank as aforesaid and under the said promissory note for Rs. 65,000 and the said agreement whereby the said Vertannes and Bertram guaranteed the payment of the balance of the said cash credit accounts.

Now this indenture witnesseth that in pursuance of the said agreement and in consideration of the release by the Bank hereinafter contained they the said Vertannes and the Administrator-General hereby grant convey transfer and assign unto the Bank all those the mortgaged premises... and all the estate right title and interest claim and demand Whatsoever of them the said Vertannes and the Administrator-General into and upon the same to have and to hold the same unto the Bank according to the nature and tenure thereof subject to such right or equity of redemption as the same are now subject to by virtue of the principal indenture (1910) and the supplemental indenture (1911) on payment by the mortgagor of the said sum of Rs. 74,017-1-4 now payable under the principal indenture and supplemental indenture and all interest at the rate aforesaid.

21. To this instrument Lucas was party and he entered into divers covenants with the Bank upon the basis of these provisions.

22. Now the contention which has succeeded in the Court below and has been maintained before us has reference to the amount due to the Bank upon the cash credit secured by the promissory note under the arrangement of 1911 for paying off Thaddeus. This is the amount stated in the deed of 1914 at Rs. 60,932-13-9, but the question of amount is not at the moment relevant. The defendant Lucas contends that as Vertannes and Bertram never in fact paid on their guarantee to the Bank but were released from it by this very deed of 4th February 1914 the deed transferred nothing to the Bank and that for the amount due on the promissory note the Bank have no security whatsoever. Of course if the deed had been stamped and attested as a mortgage, the Bank would have been secured, but as a transfer--so runs the argument--it has no effect whatever. Again if the parties had met in the Bank parlour and Vertannes had paid down the amount outstanding on the note and the Bank's officer had said, 'At last. Lucas now owes you a debt and you have security for it. You can take back your money if you assign your debt and your security to me' then a transfer would have been perfectly correct. But without this pantomime nothing it seems can be effected by a transfer not even with Lucas's consent.

23. I do not doubt that for stamp purposes and for the purposes of Section 59 of the Transfer of Property Act the line between a mortgage and a transfer must be drawn somewhere. But why draw it here? The debt to the Bank upon the promissory note was one single debt owed by two persons. As between these two one had from the other a covenant 'to indemnify and 'keep indemnified against all claim and demands.' The Bank was demanding further security which means our right is to have payment: pay: but if you want further credit satisfy us and we will withdraw our 'demand.' The principal debtor bad a duty to the surety to make the payment--not only to the Bank [Bechervaise v. Lewis (1872) L.R. 7 C.P. 372, 377]. The Bank as principal creditor had no right in the surety's security [In re Walker [1892] 1 Ch. 621], but I fail to see how it can be said that the equity of redemption was prejudiced or altered by an assignment of the surety's rights to the Bank. It was and it remained a right to redeem on payment of the sum due on the promissory note with interest at the rate carried by the note. After February 1914 the mortgagor was in the circumstances free of any danger of having to pay interest to the sureties upon any interest they might be obliged to pay to the Bank--that seems to be the only possible difference to him but that does not make a different equity.

24. I proceed now to consider whether there is any other reason why the plaintiff Bank should not have a preliminary decree in the ordinary form upon the mortgage of 1911 which repeats and comprises the mortgage of 1910. This is the only question as plaintiffs Counsel has stated that no personal decree against Lucas would be of any value and no such decree is asked for.

25. The defences which remain are--first, that the mortgage of 1911 was attested by a solicitor Mr. Stapled on, although he was not present when Lucas executed it. Secondly, that Lucas signed the deed of 1914 without reading it, and that it does not bind him. Thirdly, that the amount due on the 1910 deed to Vertannes and Bertram was paid off and that certain drafts discounted in 1912 and 1913 have nothing to do with this deed, Vertannes having negotiated them for Lucas without any security.

26. In the Court below there was a further and very remarkable defence to the effect that Vertannes and Bertram were mere benamidars for the Bank in respect of the deed of 1911, i.e., that they had no interest of their own in the matter whatsoever, but were mere nominees of the Bank put up to give a sham guarantee in order that the Bank might have the advantage of lending Rs. 65,000 to Lucas on security of his immovable property contrary to the terms of the Presidency Banks Act. The learned Judge has upheld this defence, as he has upheld all the oilier defences I have mentioned, but the learned and very experienced Vakil, who appeared for the defendant Lucas in this Court, has very properly declined to support this finding. It is, however, some what difficult to think that the learned Judge when he came to canvas the subsequent transactions of the parties was in a position to appreciate their meaning or to draw correct inferences of fact. In particular and with all respect to the learned Judge his estimate of the value of the evidence of Lucas seems to me to be demonstrably wrong. In his answers to interrogatories on 26th May 1918 (cf. also his evidence on the 18th July 1921) Lucas asserts his entire ignorance as to any deed of guarantee by Vertannes and Bertram to the Bank. The plain fact is that for years he had obtained finance from his broker: that Vertannes and Bertram were to be his sole brokers: and that his business was conducted accordingly.

27. Coming first to the allegation that Mr. Stapledon witnessed Mr. Lucas's signature to the deed of 1911 without having seen him sign, this rests wholly on the work of Lucas. 'Lucas's evidence', says the learned Judge, 'stands ex parte and there is no reason 'why it should not be believed'. Now Lucas may have no reason for trying to resist the claim of the petitioner Bank: but otherwise there seems to be something to consider. The learned Judge states that at the close of the case a petition was filed asking for leave to examine Stapledon 'Had the decision of the case hinged on this point only I would have probably given the plaintiff Bank another opportunity after mulcting it in costs. But in the view I take of the deed I do not think it necessary and so reject the application'.

28. Unfortunately it is necessary to decide this question and on this appeal being gone into at some length we acceded after argument to an application that the evidence both of Stapledon and Evenett should be taken under Order XLI, Rule 27 of the Code, and stated that we would record our reason in the judgment. In my opinion there is on the face of the judgment of the Court below substantial cause within the meaning of the rule as explained by the Judicial Committee in Raja Indrajit Pratap v. Amer Singh (1923) L.R. 50 I.A. 183. I think further that the facts to which I shall shortly refer constitute substantial cause by themselves. Moreover, if this be regarded as an exercise of our power under the Rule mero motu, it seems to be exactly within the language of Lord Robertson a case 'when, on examining the evidence as it stands some inherent lacuna or defect becomes apparent:' Kessowji's Case (1907) L.R. 34 I.A. 115; I.L.R. 31 Bom. 381 An opportunity was offered to the respondents to say whether they would want to call other witnesses: they did not desire to do so.

29. Stapledon's evidence had been taken on commission in May 1922 in case at the hearing of this appeal leave should be given to use it. Evenett was examined before us. The original document has been carefully examined. In it Stapledon's signature is above Evenett's. Both gentlemen say with perfect frankness that they make no claim to an independent recollection of the occasion apart from the document Both say that witnessing a signature that he has not seen made is a thing which Mr. Stapledon did not do. Against that Mr. Lucas says that in 1911 he did not know that two attesting witnesses were required for a mortgage, but that he can swear that in 1911 Stapledon did not see him sign. He is certainly very fortunate both as to the circumstance and as to his recollection of it.

30. Now the credibility of Lucas on this point depends not only on the circumstances directly bearing on this issue but also on his evidence and conduct as to other matters. Apart from the question of benami already dealt with, the Court is asked on the evidence of Lucas to accept several remarkable allegations. That although under the deed of 1910 Vertannes had security for all discounted bills and for 'any advances which may be made by the firm for the purposes of the said business' yet in 1912 Vertannes made himself liable as acceptor on bills to a very large amount solely for the benefit of Lucas upon a verbal arrangement that they should not be covered by the security. That in 1914 Lucas at the instance of a Mr. Morrison (then an officer of the Bank but now in Tasmania or elsewhere) signed the deed of 4th February 1914 without knowing its contents. That into this deed to be executed by four parties-false statements were put, e.g., that Rs. 13,000 was owing under the deed of 1910 whereas nothing was owing. That in spite of repeated applications to the Bank Lucas never could get them to give any particulars of his account or to let him see his own Pass-book. That his admission in writing--made twice over in July 1914 and January 1915--was made without any enquiry as to whether he did owe Rs. 76,000 or not. That in spite of his extraordinary treatment over the deed of 1914 he never got a copy of it: it being his practice not to take a copy of mortgage deeds.

31. Now the learned Judge has referred to a circumstance which showed to him that on an application to substitute the heirs of one of the puisne mortgagees Lucas had given evidence before the Subordinate Judge then in charge of this case and had been disbelieved as a witness to whose oral evidence no weight could be attached. Having read this previous judgment with some care, I take leave to doubt whether the comments made upon it by the trial Judge are justified. The trial Judge was well entitled to form his own opinion upon Lucas's evidence and if his view had been that notwithstanding his interest, his statements and his conduct Lucas was a transparently honest witness whose word in his own favour could safely be accepted to the value of half a lac and more the position of the learned Judge would have been tenable at least in form. So too if the presence of direct and cogent corroboration had turned the scale. This, however, seems to be very far from the possibilities in the present case.

32. Reverting to the evidence upon the attestation of the deed of 1911, I note first that the mortgages of 1910 and 1911 were pleaded at length in the plaint (20th December 1917). In the first written statement Lucas pleaded (paragraph 4) that the rights of Vertannes created by the documents of 1910 and 1911 had not been legally transferred to the plaintiff: also (paragraphs 8 and 9) that the debt due on the deed of 1910 had been paid off. He has no way challenged the deed of 1911 as a mortgage though he challenged the deed of 1914. This was in March 1918. In August 1918 evidence was taken on commission. Mr. Foley, called to give formal proof as against the non-appearing defendants of the document of 1910, was cross-examined on behalf of Lucas and his answers in examination-in-chief were frequently objected to Mr. Evenett, called for the same reason to give formal proof of the execution of the deed of 1911, gave (under objection) on the 16th August 1918 evidence identifying Stapledon's signature, Lucas's signature and his own. 'The document 'was executed by Lucas in my presence.' In cross-examination on the 22nd August on behalf of Lucas the witness, who in the course of practice for 20 years must have witnessed hundreds of documents, was asked without being given the document to look at, who were present. His answer showed that by this time he had forgotten who the witnesses to this particular document were and in fact he said so frankly. Stapledon had given evidence only as to the deed of 1914 and had been cross-examined only on that. As the written statement at that time contained no denial of the entering into the indentures of 1910 and 1911 and as Lucas had admitted them in April in answer to interrogatories, cross-examination on his behalf was of a fishing character. When the plaintiff Bank desired to amend the plaint so as to claim upon the deed of 1914 as a transfer only, the application was resisted on the ground that it would be unfair to the defendants since the witnesses on commission 'were none of them cross-examined about the bonds of 1910 and 1911 as the suit was not based on the said bond'. (Order sheet No. 49, 21st December 1918, Part III, p. 23). This was accepted as a fact by the Judge in making his order as to costs, but he allowed the amendment substantially on the ground that the claim was an honest claim and 'the major portion of the claim is admittedly due'. The additional written statement of Lucas was filed on the 6th April 1920. It is mainly occupied with the question of benami but by paragraph 7 it pleads that the deed of 1911 was not legally attested and presented for registration. The puisne mortgagees now appear and challenge the deeds of 1911 in particular by written statement filed on 17th April 1920. In July 1921 the case was tried, one witness only being called for the plaintiffs to prove some facts about the Bank account. Lucas was the only witness for the defence. He says that Evenett alone was present when he signed. 'That six months or a year ago it struck me that Stapledon was not present. It never struck me to suggest to my pleader when cross-examining Stapledon that he was not present when I signed it'. Again 'I came to know of the law on the point after amendment of the plaint in this case. I did not know it before as the question never arose before. My pleaders then asked me about the attestation of all documents.'

33. So far the facts were before the learned Judge when he said that Lucas evidence stands ex parte and there is no reason why it should not be believed. In my judgment there is cogent reason. The first written statement did in fact appreciate that the deed of 1914 might be relied on as a transfer of rights under the deed of 1911. If neither was attested by two witnesses there could be no mortgage. Lucas plainly did know the statutory requirement for the purposes of his original written statement filed in March 1918 because the third paragraph states it explicitly as regards the deed of 1914. The origin of the whole matter is in the fact that Mr. Evenett on 22nd August 1918 after a long examination upon all sorts of documents on previous days was asked as to the witnesses present at the execution of this document without being given the document to look at. It is idle to say that the defendant's case was not put to him because on the pleadings it was not relevant. He was cross-examined. The defendant was fishing this very water to see what he could get. If materials would be obtained, the pleadings were plainly not going to prevent some case or other being made if it promised well. No concrete case was put to Evenett to the effect that the deed was executed when he was alone with Lucas, because Lucas was rushing off to Dacca, and that no witness in the whole of Messrs. Morgan's office could be had to sign, though the power-of-attorney had been mentioned in examination-in-chief. Not a word of this concrete story is to be discovered in Lucas's own evidence. In my opinion the attestation of the deed of 1911 is amply proved, and both Mr. Stapledon and Mr. Evenett are entitled to be absolved from a grave charge made against them both.

34. The second line of defence upon the facts is that Lucas signed the deed of 1914 without reading it and that therefore it is nullity. I do not understand the evidence of Lucas to suggest that he signed something without knowing even the general nature of it or the properties comprised in it. To his mind apparently he was signing a mortgage in favour of the Bank presumably for his debt to the Bank. Plainly Vertannes had something to do with the matter. On 18th April, 1915 Lucas gave a second mortgage for Rs. 17,868 reciting that 'the properties hypothecated to you are mortgaged with the Bank of Bengal.'

35. This defence was in the original written statement. 'This defendant was taken quite at unawares and signed the said document at Messrs. Morgan & Co.'s office without even having an opportunity of going through the deed before signing the same and that he did so in the belief and on the assurance of defendant No. 17 (i.e., Vertannes) that the facts were correctly stated.' The evidence of Lucas, on which it rests, is that when the parties met at the solicitor's office he was shown an engrossed deed, that he complained to Morrison that he knew nothing of its contents, that Morrison asked him not to be nasty and disagreeable, that Vertannes said that everything was all right and that on the impression that he would be financed by the Bank on signing the deed he signed it. That after this the Bank never did finance him; that he spoke to Morrison about it but made no application in writing about this to the Bank. That he came to know of the statements of: amount contained in the deed only when this suit was brought in December 1917. That he never could get any particulars of his account from the Bank and after admitting to some Rs. 76,000 twice he refused to admit anything.

36. Now both Mr. Stapledon and Mr. Vertannes were called before the Commissioner. The cross-examination was not such as to leave it open to Lucas to make the case which he now makes. Vertannes was not cross-examined at all upon the point; in this case there is not even a pretence of touching on the subject. Lucas says he was busy and could not remain to instruct his pleader. Evenett in the following month (17th March 1914) identified Lucas before the Registrar: nothing was put to him.

37. The learned Judge seems to think that the plaintiff Bank have to prove that Lucas read the draft or the deed. If he was content to take the statement of Vertannes or of Morrison he may certainly prove that they deceived him. Or he may set up a case of domination of his will and of undue influence under the Contract Act. But what this case is or why it should be seriously entertained upon this evidence I wholly fail to see.

38. The third series of findings upon fact are to the effect that in February 1914 nothing was due from Lucas to Vertannes upon bills discounted under the deed of 1910. That deed did not prescribe who should be drawer, drawee and acceptor but at first the practice was apparently for Vertannes to draw on Bertram, Lucas not being a party. At the end of 1912 there were a series of drafts drawn by Lucas on Bertram in favour of Vertannes. All the drafts were discounted with the Bank and all were to finance Lucas. On all of them Vertannes and Lucas were liable. Lucas says that there was a special verbal arrangement whereby his liability to Vertannes was not to be covered by the deed of 1910. This is a very definite statement: 'Vertannes was negotiating drafts for me without any security.' Considering what was done in February 1914 and later, this requires a great deal of explanation on the part of everybody. Vertannes is nowhere asked as to a bargain of that character, as to whether he negotiated drafts without security, why he had improper statements of liability put into the deed of 1914, whether the Bank in taking over his security and releasing him knew that certain drafts were excluded from a security that purported to cover not only all drafts but all advances. He is merely cross-examined to admit the difference in the way the bills were drawn and that is all he does admit. Moreover, Vertannes' dead partner Bertram was a party to these drafts. Why should the administrator-General be allowed to assign contrary to the good faith of the matter?

39. Again an account was put to Vertannes which purports to be a rough statement and expressly mentions that it is incomplete. This is it appears in the handwriting of a clerk of Vertannes. In it by an undated credit put down at the end Lucas is credited. 'By draft Rs. 50,000.' That is quite all right as far as it goes, bat one must look to see what happened to the draft--whose it was, whether it was met or renewed or dishonoured. This account is not an account of the bills under discount. The learned Judge has been persuaded that it shows that little or nothing was owing under the deed of 1910 and that the statements in the deed of 1914 are outrageously wrong. He has not thought it necessary before finding this to take an account of the transactions between Lucas and his financing brokers, though commission on all local sales is expressly provided for by the deed of 1910.

40. The defendant's case as put by his learned Vakil, to whose clearness I am personally much indebted, is that the accounts of the Bank are doubtless all right but that if Vertannes and Bertram who were handling the money for Lucas retained some of it improperly, then Lucas would be liable on the bills to the Bank but Vertannes and Bertram could not have claimed the full amount under their security. Now the evidence of Lucas shows that he knew that Vertannes and Bertram had taken Rs. 10,000 under some claim or other. This appears to be in July and August 1912 (cheques 389, 390 in their bank account, Exhibit. 101). He says they undertook to pay and he renewed the drafts expecting them to repay to the Bank. He states that he discussed the matter with the Administrator-General whose letter of 14th May 1913 is in evidence. Not a word is put to Vertannes about promises to relieve Lucas as to Rs. 10,000 or as to why he drew the money.

41. In these circumstances the question is whether on the evidence Lucas is entitled as against the Bank which took its-transfer with Lucas' assent to the deed of 1914 to have an account taken as between himself and Vertannes and Bertram ripping up the basis on which the transfer was taken by the Bank, and going into the whole of the general account between Lucas and his brokers. I fail to see how on these pleadings and in this suit to which Vertannes and Bertram's estate are only pro forma parties he can do anything of the sort and I see no such evidence as would justify such a course were it possible.

42. In my opinion there must be a preliminary decree declaring the plaintiff Bank to be entitled to a first charge upon the property comprised in the deeds of 1910 and 1911 for the sums mentioned in the deed of 1914 together with interest, costs, charges and expenses. The case must go back to the Court below to have the necessary account taken. The appeal should be allowed as against Lucas with costs here and below and with liberty to add these to the security.

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